The Issues with Static Tender Procurement Process
As the technology revolution has taken hold, AI and data science have become indispensable tools for freight procurement and logistics management businesses when it comes to boosting their efficiency and revenue. Yet, while many “old school” procurement and logistics processes have been overhauled using modern computing tools, one process continues to be stuck in yesteryear: freight tendering!
Manufacturers spend more than $1 trillion on shipping each year, yet many continue to rely on a static tender process for freight procurement that not only makes it incredibly challenging to manage freight costs, but is also fraught with transparency issues.
With that in mind, here are a few ways that the static tender process is undercutting shipper freight budgets and performance, and why the time has come to swap it in for something more dynamic.
Lost Efficiency and Lowered OTD Performance
Relying on the static tender process can have significant consequences on a shipper’s efficiency and on-time delivery rates (OTD). For example, when a primary carrier rejects a load, it could be hours before either a secondary or tertiary carrier accepts the load, or a broker is able to lock in an alternate carrier. This means that not only has a shipper’s supply chain been gummed up for hours but that the OTD of that load may be seriously at risk. With dynamic solutions powered by AI and data science, however, shippers can quickly tender a load to asset-based, complaint, out-of-network alternates, thus dramatically cutting down on the amount of time a rejected load is left sitting unshipped and maintaining OTD success rates.
In addition to the OTD ramifications, relying on the static tender process can also have massive cost implications as well -- especially when a load falls to the broker market. Renowned for hidden fees, brokers typically slap a hidden margin of anywhere between 18-25 percent on each load they facilitate. This can translate into millions of dollars in lost revenue each year for shippers -- which could easily be avoided if they were leveraging a dynamic tender solution that enabled them to immediately source alternate carriers.
Lack of Actionable Data
Perhaps the most glaring issue with the static tender process is the lack of data insights it provides. Making smart freight procurement decisions today hinges on whether a company has a robust view of the marketplace. This simply isn’t possible through the static tender process as brokers provide as little data as possible to shippers so that they can obscure fees and performance information. Dynamic tender solutions, however, unlock troves of real-time data for shippers, enabling them to better understand the market and make more agile decisions.
After decades of inefficiency, it is time for shippers to finally toss their static tender operations to the curb. And while trading in a “time tested” process for something cutting edge may seem uncomfortable, adopting a dynamic tender solution will allow shippers to hit heights they never thought were possible in terms of freight procurement.